Prospects: Whether Elan can succeed in bringing Tysabri back to the market, when that will happen and on what terms are the key issues now facing investors in the company.

Chief executive Kelly Martin was confident yesterday that the suspension of the multiple sclerosis drug was "a temporary setback" and one that the company could work through.

Describing the decision to withdraw the drug on the basis of one fatality as "exceptional", Elan said it was motivated by caution as well as consideration for the current environment in the US where there has been growing concern over the safety of leading drugs.

Elan said it would now work with its partner, Biogen Idec, and the FDA to assess whether there was a link between PML (progressive multifocal leukoencephalopathy), the rare disease of the central nervous system that caused the death of the patient, and treatment with a combination of Tysabri and another drug, Avonex.

Provided there were no further adverse findings, Tysabri could be back on the market by the third quarter, Mr Martin said.

But investors, reeling from the second crash in the share price in just three years, were less upbeat.

While the consensus in the market was that Elan, which came close to collapse following the last stock price crash, was not facing a cash crunch this time around, analysts said the shares faced significant uncertainty over the coming months.

With $1.5 billion in cash, and repayment of its debt moved out until 2008 and beyond, Elan should have enough cash to weather the current storm.

"The question is what comes at the end of it. At the moment, visibility is poor," said Goodbody analyst Ian Hunter. "Will they have a blockbuster or will we have to wait for the Alzheimer's treatment?"

With its Alzheimer's programme still in the very early stages of development, Elan's fortunes were closely tied up with Tysabri. The drug, whose efficacy and safety profile had been widely touted prior to its US launch in November, was forecast to take a significant share of the $8 billion global multiple sclerosis market, generating sales of as much as $3 billion for Elan and Biogen Idec in coming years.

But analysts are now downgrading those forecasts, on the assumption that even if the drug makes it back to the market, it will be overshadowed by wariness among doctors and patients.

In addition, Tysabri may not be useable as a combination therapy following the uncertainty over its use with Avonex, while there are question marks over what warnings or restrictions it may now have to carry on its label. The timing of its return is also an issue, with some pundits believing it could take a year.

Meanwhile, fund managers noted that the rationale for the recent flow of funds into the stock - which saw it rise by 260 per cent last year alone - now lies in tatters. "The core thesis behind the stock was that they were moving from pipeline to profits but that is now fairly well devastated," said one institutional investor. Elan will now have to revise down its forecasts for the current year while its expectation of a return to profit in 2006 is also likely to be delayed.

At current levels, analysts believe Elan is still not cheap enough to become a takeover target. But were the shares to fall further, or the prospects for Tysabri's relaunch to worsen, it could hit levels that might prompt its partner in Alzheimer's research, US pharmaceutical giant Wyeth, to consider a bid.